Saving the health of an industry

The most formidable challenge is undoubtedly to ensure that not only do the existing generic pharmaceutical producers pledge continued commitment to the industry, new investors should also feel motivated to commit to the development of the generic pharmaceutical industry in India. Photo: Bloomberg

When the government unveiled a plan for providing essential medicines free of charge in all public health facilities in the country, the step was considered a game changer. However, since its announcement, the free medicines initiative seems to have gone onto the backburner; as it stands now, it has been drowned under the other big-ticket public welfare announcements the government made recently.

The free medicines initiative is a welcome step towards universalization of healthcare in India, considering that expenditure on medicines makes up for nearly one-third of the total healthcare spending by an average household. While it is true that many other factors, including some obvious ones such as availability of safe drinking water and hygienic sanitation, can contribute handsomely towards improving the overall public health conditions, yawning deficiencies in access to such facilities has resulted in excessive dependence on medicines. For millions of Indians, curative healthcare is the stark reality and preventive healthcare a cherished dream.

It is hardly surprising, therefore, that the focus of the debate on healthcare in India should be on access to medicines at affordable prices. Policymakers have long recognized the importance of this issue and in so doing took proactive steps several decades ago to ensure that India develops a strong domestic pharmaceutical industry. Those responsible for charting the destiny of this country in the early years after independence recognized that the pharmaceutical industry the world over was being driven by a small set of global companies that were using their patent monopoly to keep a stranglehold over the market. During these years, Indian consumers had to pay a heavy price: a sub-committee of the US senate reported in 1963 that prices of pharmaceutical products in India were among the highest in the world.

What followed were deliberate attempts to promote a domestic pharmaceutical industry. The building block of these attempts was the Indianization of the colonial Patents and Designs Act of 1911. The new law enacted in 1970 helped the generic pharmaceutical industry take root and within the next two decades, India could boast of the largest generic pharmaceutical industry in the developing world. This industry not only provided the cheapest formulations to patients in India, it provided affordable medicines to patients in Africa afflicted by HIV/AIDS, tuberculosis and malaria. More importantly, the presence of generic producers changed the dynamics of markets for pharmaceutical products as market leaders were forced to moderate the high prices they were charging for medicines to treat the diseases.

As the government of India rolls out its free medicines initiative, it needs to understand that the only way this programme can be successful is to ensure the domestic industry is able to provide generic medicines at affordable prices. For a government that is trying to rein in its bulging expenditure, availability of essential medicines at affordable prices should be of prime importance. The onus is, therefore, on the government of India to ensure that the country’s generic industry is nurtured well so that it can keep up the supplies needed to effectively implement the free medicines initiative.

It is imperative to nurture the generic pharmaceutical industry given the uncertainties facing the industry stemming from the spate of takeovers. The government should respond to this development with alacrity for the country can ill-afford to lose the industry that can contribute to the improvement of the health of its populace. A number of recent reports have alluded to the increasing disease burden of India’s population, besides reporting that in respect of the health indicators figuring in the millennium development goals, India needs to tighten its belt.

What must the government do to provide a sense of security to the generic pharmaceutical producers? The first step should be to formulate a policy that considers the imperatives of a strong a viable generic industry. It is important that this policy take a medium-term perspective so that the foundations of this industry can be strengthened. For doing so, plans will have to be put in place to ensure that the pharmaceutical industry in India is built from the basic stage of production. This, in other words, implies that the industry does not merely produce formulations, but produces the active pharmaceutical ingredients (APIs) as well. It should be pointed out that one of the major weaknesses that India’s generic industry has developed in recent years is its increasing dependence on countries such as China for APIs. This trend needs to be reversed by taking urgent steps to increase domestic production of APIs.

The most formidable challenge is undoubtedly to ensure that not only do the existing generic pharmaceutical producers pledge continued commitment to the industry, new investors should also feel motivated to commit to the development of the generic pharmaceutical industry in India. For this to happen, the government needs to play a proactive role to protect the interests of generic producers, particularly against hostile takeovers. If US lawmakers can prevent takeovers of their petroleum firms in the interest of national security, why can’t the Indian government take similar steps to ensure the health of its population?

Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi.